Blue Star Helium Ltd (ASX:BNL, OTC:BSNLF) has completed the initial development plan for its Las Animas Project in Colorado, USA, which will see the company appointing a mid-stream operator to produce its first helium product gas from the Voyager discovery in return for a monthly lease payment.
This third-party operator solution was selected for its minimal risk to Blue Star’s up-front capital commitments while still delivering highly attractive returns.
Blue Star is negotiating contracts to lease the midstream company’s processing facility in North America, with first delivery expected in the second half of next year.
Voyager field plan view.
Targeting premium pricing
“We have evaluated multiple options for our initial project developments in Las Animas. These included new builds, the purchase and refurbishing of used facilities and lease options,” Blue Star managing director and chief executive officer Trent Spry said.
“Market research was also conducted covering potential off-takers, helium purity, tolling (liquification) and transport options to inform the selection of the initial development phases and further optimisation and expansion potential.
“For the initial development at Voyager, we have selected the leased and third-party operated plant option with a helium purity output of over 98%. This will allow plant tailgate sales as well as tolling arrangements through surrounding liquefiers.
“The leased plant option eliminates any requirement for price-concession off-take agreements, allowing us to target the premium pricing available in short-term contract markets and spot sales, as well as allowing flexibility and ramp-up at the start-up phase of the facility.
“The plant can be expanded via the addition of a modular membrane unit to produce higher purity product and increased helium output in the future. With additional high helium raw gas contribution from surrounding discoveries the facility can also be further expanded with the addition of a second PSA plant.
“The current helium market affords us the ability to maximise these opportunities. Once both plants are operational, and in line with the helium market at the time, we may then seek to enter longer-term offtake arrangements.”
Permitting underway
Blue Star is forecasting a pre-production capex of about US$2.9 million, comprising US$1.5 million for drilling and US$1.4 million for a gathering system and site works. The unit operating cost after ramp-up is estimated at US$84 per thousand cubic feet (mcf) helium product gas.
The company is targeting the development of three to four wells at Voyager. Permitting of the wells is underway.
Each well will have an initial production rate of 350 mcf per day and a decline rate of 33% per annum.
Voyager development plant metrics.
Larger-scale development
On its Galactica/Pegasus plant, Blue Star said global energy consulting firm Sproule was finalising a resource update, which was expected to result in the declaration of contingent helium and CO2 resources.
The Galactica/Pegasus development is a larger-scale project, which is expected to include a CO2 extraction route and by-product stream.
Further engineering and market work is underway to refine the initial planned development configuration and to forecast helium and CO2 production and cost estimates.
Blue Star is considering a range of development options for the facilities, including a leased plant and a third-party operated option. A final decision can be expected in the first half of 2023.
The Galactica/Pegasus facilities are planned to be permitted in parallel with the Voyager development.